ITC Ltd. witnessed a significant block trade on the National Stock Exchange (NSE), with institutional investors executing a substantial transaction worth ₹19.27 crores.

Block Trade Details

The large-scale transaction involved key parameters that highlight the magnitude of institutional activity in ITC shares:

Market Implications

Block trades represent off-market transactions typically executed by institutional investors, mutual funds, or large stakeholders. These transactions are conducted to minimize market impact while facilitating large-volume trades. The execution price of ₹349.75 per share reflects the prevailing market conditions at the time of the transaction.

Transaction Significance

The substantial volume of over 551,000 shares changing hands in a single block trade indicates significant institutional activity in ITC stock. Such transactions often represent portfolio adjustments, stake changes, or strategic investment decisions by large market participants.

Block trades are an important component of market liquidity and provide insights into institutional investor sentiment toward specific stocks. The completion of this ₹19.27 crore transaction demonstrates continued institutional interest in ITC shares at the executed price level.

Shares of FMCG-to-cigarette major ITC are expected to remain in focus when markets open on Monday, January 5, after closing at a three-year low on Friday. The stock has come under sustained selling pressure, falling 24% in just two sessions, following the government's announcement of additional excise duty on tobacco products effective February 1, 2026.

Government Announces Steep Tax Increases

The government has announced a sharp increase in excise duty alongside a revision in GST rates under GST 2.0, from 28% to 40%, also effective from February 1. The combined impact of these measures is expected to push the overall tax burden on cigarettes up by 40-50%, marking the steepest hike in nearly two decades. This unprecedented increase has triggered a wave of downgrades across brokerages, with most domestic analysts turning cautious or bearish on ITC.

Brokerage Downgrades and Target Price Revisions

Major brokerages have responded swiftly to the tax announcement with significant downgrades and target price cuts:

Motilal Oswal's Analysis

Motilal Oswal has downgraded ITC from 'Buy' to 'Neutral' and revised its target price to ₹400. The brokerage estimates that ITC will need to hike prices by at least 25% at a portfolio level just to maintain current margins. Assuming the continuation of the National Calamity Contingent Duty (NCCD), the new tax regime is expected to increase the effective incidence by around 50%.

The brokerage noted that this tax hike comes after several years of stability in cigarette taxation, which had helped legal volumes grow at around 5% CAGR and supported a 50% rally in the stock. The abrupt shift could lead to downtrading, accelerate the illicit market, and compress volumes. Motilal now values the cigarette business at 14x Dec'27E EV/EBITDA, down from its previous multiple of 17x.

Nomura Takes Bearish Stance

Nomura has adopted the most bearish position, downgrading ITC from 'Buy' to 'Reduce' with a sharply lower target price of ₹340, down from ₹540. The brokerage flagged that the more-than-40% increase in cigarette tax incidence could force ITC to raise prices by over 30%, triggering a 15% year-on-year decline in sales volumes and EBIT for FY27.

Nomura has also cut its valuation for the cigarette segment to 16x P/E, down from 25x. The brokerage described the tax increase as "unprecedented" and highlighted that such a steep hike is expected to exert pressure on margins and legal cigarette volumes, especially given high raw material costs and competition.

Nuvama's Cautious Outlook

Nuvama Institutional Equities downgraded ITC to Hold from Buy, arguing that the magnitude of the tax hike marks a clear break from the relatively benign regime that had supported a recovery in legal cigarette volumes. Abneesh Roy of Nuvama stated, "While we expected a sharp tax hike on cigarettes, the magnitude seems higher than anticipated, likely prompting consensus downgrades to ITC's cigarette volume and EBITDA estimates as well as multiples."

The brokerage expects both cigarette volumes and cigarette EBITDA to decline in FY27 after nearly 6% volume growth in FY26, drawing parallels with the FY13-17 period of "harsh" duty increases. Nuvama cut its 12-month target price to ₹415 and reduced its tobacco valuation multiple to 17 times one-year forward earnings from 23 times earlier, alongside EPS cuts of about 6.70-6.80% for FY27 and FY28.

Market Impact and Outlook

Analysts across brokerages are concerned that the steep tax increases will lead to higher cigarette prices and could dampen demand significantly. The consensus view suggests that while ITC may attempt to mitigate the impact through staggered price increases, the structural negative impact on volumes and margins appears unavoidable in the near term.